Debt Collection

We have an excellent success rate for recovering debts and negotiating favourable outcomes for our clients.

Our debt recovery tools and techniques and have been developed and proven by our Accredited Specialists in Commercial Litigation and include:

• early evaluation of the debt and the most effective recovery strategies including; identification of securities or personal guarantees under existing contracts, the ability to utilise Security of Payment Laws, consideration of debtors’ likely financial position and ability to pay, and consideration of enforcement options if a future Judgment is obtained,
• drafting effective standard and detailed letters of demand,
• timely phone demands and early dispute identification,
• liaising and negotiating with debtors in relation to payments, Payment Agreements and Settlement Deeds,
• commencing Court proceedings (drafting Statements of Claim), where necessary,
• preparation, filing and service of Statements of Claim,
• applications for Default Judgments or negotiating Consent Orders with or without Instalment Orders,
• acting in relation to defended Court proceedings, and
• enforcement of Judgment debts.

If the debt is genuinely disputed, the best outcome is often a commercial compromise.

This means that whilst you might not receive the full amount of the debt you will avoid some of the costs, delays and headaches that can be associated with defended Court proceedings.

A negotiated compromise is typically recorded in Settlement Deed which can be used to create additional security for payment (personal guarantees and/or

charges over land or other properties) and rights to recover legal and collection costs if payment is not made in accordance with the Deed and further recovery action is required.

Our experienced Lawyers can:

• advise you in relation to the merits of any disputes,
• provide timely and practical advice to help you resolve dispute, and
• draft appropriate Settlement Deeds to record the terms of any compromise and final releases in relation to matters in dispute.

If a debtor is genuinely unable to pay a debt in full, in most cases it is preferrable to negotiate a reasonably payment arrangement and receive payments voluntarily than to proceed with Court proceedings and be left trying to enforce a Judgment against a debtor who has no assets.

If a debtor asks for more time to pay, we always recommend that our clients get something in return. This can be achieved through a Payment Agreement.

Payment Agreements record the terms of the payment arrangement but can also be used to improve a creditor’s legal position by creating:

• an acknowledgment of the debt and release of any potential cross claims,
• security for payment, including third party guarantees and charges over real property and personal property,
• a right recover interest at an appropriate commercial rate,
• a right to recover legal and debt collection costs if the payment arrangement is not honoured and further recovery action is needed.

When a debt is subject to a Payment Agreement the chances of not recovering payment in full or incidental costs is vastly reduced.

Payment Agreements are particularly useful where a creditor does not already have existing contractual rights in relation to the above matters.

In most cases we will have considered enforcement options and determined an enforcement strategy in relation to a Judgment debt when initially instructed to act.

The enforcement options available for the enforcement of Judgment debts include:

• Examination Notices, Examination Orders and examination of debtors’ financial positions,
• Garnishee Orders in relation to Bank Accounts and third party debts owing to the debtor,
• Garnishee Orders in relation to Wages,
• Writs for the Levy of Property,
• Registration of Writs over Land,
• Orders for the sale of Land,
• Serving Bankruptcy Notices and Bankrupting individuals,
• Serving Creditors’ Statutory Demands and winding up companies in liquidation.

We can also assist with the registration and enforcement of interstate and foreign Judgments.

The best debt collection strategy is to avoid bad debts and disputes wherever possible.

Businesses can reduce instances of bad debtors and disputes, and thereby improve cash flow and profitability, by:

• developing and training staff to following appropriate Credit Management and Debtor Management procedures, and
• making effective everyday contracts with customers utilsing standard form contract documents including Quotation Forms, Purchase Order Forms, Credit Applications, Contract Variation Forms and customised Terms & Conditions of Trade prepared by our experienced Commercial Lawyers.

Our Commercial & Debt Collection team can assist with:

• the preparation of standard form contract documents,
• the preparation of Credit Management & Debtor Management procedures,
• initial and ongoing training and assistance for staff on how to use them, and
• registration of securities including security interests over personal property on the PPSR and Caveats over real property.

See here for more information about our Business Contracts Package including customised Terms & Conditions of Trade.

In most cases our Best First Step Debt Collection approach will result in one of the following outcomes within 14 days:

• Payment to you in full (inclusive of any debt collection costs you are entitled to recover under your existing contracts),
• Negotiation of a suitable payment arrangement (or Payment Agreement) including payment of an upfront lump sum or initial instalment, or
• Discovery of a genuine dispute, negotiation of an appropriate compromise or Settlement Deed and payment of a proper amount.

In these instances, not only do you get paid, there is also a significant cost saving for your business for fees that would otherwise have been payable to a Debt Collection Agency for their commission and legal costs.

Our Best First Step Debt Collection service includes:

• Initial evaluation of your right to recover payment of the debt including your rights against any guarantor, security for payment and right recover legal and debt collection costs,
• Preparation and issue of a legal letter of demand by post and email demanding payment within 7 days and specifically referencing the additional Court costs and Solicitors’ fees that will be claimed if the demand is ignored and it becomes necessary to commence recovery proceedings through the Courts, and
• A strategic Phone Demand prior to the expiration of the 7 day demand period.

We offer all this for fixed fee of only $220 (incl. GST).

Phone Demands are an important tool overlooked by most debt recovery lawyers and ineffectively employed by many debt collection agencies.

Phone Demands within the 7 day demand period demonstrate to your debtor that we mean business and that the imminent commencement of Court proceedings (with the incidental expense falling on the debtor) is a very real threat.

The purpose of a timely Phone Demand is to:

• Confirm the debtor’s receipt of the letter of demand,
• Take immediate payment of the debt, where possible, or to negotiate payment in full or a suitable payment arrangement, and
• Identify whether any dispute exists at the earliest possible stage.

When a Phone Demand is not made and a debtor ignores a letter of demand, most debt recovery lawyers and debt collection agencies will recommend the immediate commencement of Court proceedings. This involves legal fees for preparation of a Statement of Claim, Court filing fees and process serving fees.

The time and costs associated with commencing Court proceedings can in many cases be avoided by a simple and timely Phone Demand. Phone Demands will generally also result in a debtor making voluntary payment(s) which means that further costs and delays of obtaining and enforcing a Judgment can be avoided.

Additionally, if Court proceedings are commenced and the debtor files a Defence or Cross Claim in relation to a dispute that would have been easily discovered by a Phone Demand, in many instances (particularly in relation to claims in the Small Claims Division of the Local Court < $20,000) creditors will find themselves wondering how the dispute was not discovered earlier and what they can do to minimise their legal costs of the defended Court proceedings.

If a debt is disputed our experienced Solicitors will be able to promptly advise you in relation to the dispute and how to resolve it.

Apart from our collectors being qualified and experienced Solicitors, we offer Best First Step Debt Collection for a fixed fee of only $220 (incl. GST). When we collect that’s all you pay, and if your contract already entitled you to recover legal costs we will claim our costs in our letter of demand.

Whilst many debt collection agencies offer a no-collect no-commission service, their commissions usually range from 20% to 35% (plus GST). If they don’t get a result and recommend you instruct them to engage their Solicitors to commence Court proceedings, you will need to pay legal costs in addition to their commission.

Even if it were assumed that our Best First Step Debt Collection service got the same 14 day result as a collection agency, as set out below, your business would save $4,800 (excl. GST) based on first step recovery action being taken for say 10 debts of $3,000 each.

Assuming again the same collection result but this time in relation initial recovery action for 5 debts of $5,000 each with only 3 collections, your business would save $3,750 (excl. GST).

The actual saving is likely greater still if a Debt Collection Agency has encouraged you to commence Court proceedings and incur legal costs that could have been avoided by a strategic Phone Demand.

In New South Wales, the limitation period for debts is six years from when either:

1. The debt became due and payable; or
2. The last date a payment was made towards the debt; or
3. The date the debtor acknowledged in writing that they owed the debt.

whichever is the latest.

The “Debt collection guideline for collectors & creditors” published jointly by ASIC and the ACCC provides that if a debt collector is notified that liability for a debt is disputed, and the debtor’s liability for the debt cannot be established, the debt collector should cease chasing the debt. If a debt collector continues to pursue a debt despite liability being genuinely disputed, such conduct may amount to harassment and coercion in contravention of Section 50 of the Australian Consumer Law.

If you simply ignore a debt collector, the debtor may not pursue the matter – or they may commence court proceedings against you. Once proceedings are commenced, in most circumstances the debtor will insist upon payment of their legal costs incurred in relation to the commencement of proceedings (or otherwise seek that the court make a costs order against you).

For this reason, it is always best to engage early with a debt collector. If you receive a notice that you are being taken to court, whether by the service of a statement of claim or a letter, it is best to get legal advice as soon as possible regarding the strength of the claim and any defences available to you.